Economists: It's Good State Unemployment Rate Isn't Too Low

Dan Haar/Hartford Courant

A worker at FuelCell Energy’s Torrington factory moves a stainless steel sheet onto an automated welding machine. FuelCell Energy is one of 150 manufacturing firms that has gotten state assistance from the Department of Economic and Community Development.

A worker at FuelCell Energy’s Torrington factory moves a stainless steel sheet onto an automated welding machine. FuelCell Energy is one of 150 manufacturing firms that has gotten state assistance from the Department of Economic and Community Development. (Dan Haar/Hartford Courant)

The United States, 10 years after the beginning of the Great Recession, has returned to full employment — and so has Connecticut.

That's what a business audience of about 500 heard Monday at the Hartford Marriott Downtown from Boston Federal Reserve President Eric Rosengren at the annual Economic Summit. The event is co-hosted by MetroHartford Alliance and the Connecticut Business and Industry Association.

Full employment doesn't mean no one is looking for work. Rather, it means that if unemployment dropped more, it could be inflationary.

The United States has had only five years out of the last 40 with a lower average annual unemployment rate.

Rosengren said that because the country is at full employment and inflation is just under 2 percent, the Federal Reserve should raise interest rates three times this year, and let its balance sheet of mortgage-backed securities continue to gradually decline as people sell their houses.

Both actions would lead to higher mortgage rates.

One of the questions from the audience noted that Connecticut's economy hasn't really recovered as much as the national economy.

Connecticut's unemployment rate dropped from 5.1 to 4.7 percent, which is statistically indistinguishable from the national unemployment rate of 4.6 percent.

But the decline comes at the same time that state job growth has been stagnant. While the federal Bureau of Labor Statistics says employers...

Because Connecticut is more educated than most states, and people with college degrees tend to have lower unemployment, Connecticut has had 11 years out of the last 40 with lower average annual unemployment rates than the current 4.7 percent. For eight years, it had a sub-4 percent unemployment rate, and in 1999 and 2000, the unemployment rate was below 3 percent.

The questioner asked how will returning to normal interest rates impact Connecticut?

Rosengren said although Massachusetts' unemployment rate is 2.9 percent, that's not as good as it sounds.

"I would argue it's actually a problem for those states that unemployment has gotten so low," he said, because it makes it difficult for businesses to find workers, even for jobs that don't require a lot of education or specialized training.

Ryan Sweet, who leads an economics forecasting team at Moody's Analytics, said that wages rising faster in New York, New Jersey and Massachusetts than in Connecticut is going to make the state more attractive to businesses making expansion decisions.

"This is going to be particularly visible in information technology," he said.

Rosengren said it's hard for the Federal Reserve to do economic forecasting because there are so many uncertainties around tax changes and infrastructure spending in the new Trump administration.

Friday's report from the Labor Department portrayed a job market that remains durable...

The first question he received was one of those uncertainties: what would happen if NAFTA was reversed?

"I think it's appropriate to look at our trade agreements, make sure they're fair on both sides," he said. But, he added, the United States cannot put up barriers to imports without other countries retaliating.

Connecticut Department of Labor economist Patrick Flaherty said he was glad that Rosengren noted that as unemployment falls, businesses are going to have to spend more money training workers.

In the past 10 years, Flaherty said, "Private investment in employee training has declined by billions of dollars a year. Companies are now saying they cannot find employees with the right skills. This is not a surprise."

Flaherty said his organization has funding for training. The Department of Labor helps pay for apprenticeships, and for small businesses, it subsidizes wages for new hires if they were unemployed and meet certain income and geographical guidelines. It also pays for training existing workers. The state has also spent millions expanding manufacturing training programs at vocational high schools and community colleges.

But all of those programs are not enough to make up the drop in private investment, he said.

CAPTION

The ownership of the Hartford Regional Market is being transferred from the state Department of Agriculture to the Capital Region Development Authority. CRDA would oversee any future redevelopment. The market has long been seen as ripe for growth but plans to upgrade the market have languished. The transfer of ownership has caused consternation at the market among vendors who see their future there as uncertain.

The ownership of the Hartford Regional Market is being transferred from the state Department of Agriculture to the Capital Region Development Authority. CRDA would oversee any future redevelopment. The market has long been seen as ripe for growth but plans to upgrade the market have languished. The transfer of ownership has caused consternation at the market among vendors who see their future there as uncertain.

CAPTION

The ownership of the Hartford Regional Market is being transferred from the state Department of Agriculture to the Capital Region Development Authority. CRDA would oversee any future redevelopment. The market has long been seen as ripe for growth but plans to upgrade the market have languished. The transfer of ownership has caused consternation at the market among vendors who see their future there as uncertain.

The ownership of the Hartford Regional Market is being transferred from the state Department of Agriculture to the Capital Region Development Authority. CRDA would oversee any future redevelopment. The market has long been seen as ripe for growth but plans to upgrade the market have languished. The transfer of ownership has caused consternation at the market among vendors who see their future there as uncertain.

CAPTION

LimeBikes were delivered to Hartford Wednesday morning, officially kicking off the city's first bike share program.

LimeBikes were delivered to Hartford Wednesday morning, officially kicking off the city's first bike share program.

CAPTION

Megan Ahern, business analyst for Nutmeg State Financial Credit Union, demonstrates the computerized check-in kiosk for driver’s license renewals to be performed in the credit union’s new Milford branch office, starting Thursday, under a contract with the state Department of Motor Vehicles.

Megan Ahern, business analyst for Nutmeg State Financial Credit Union, demonstrates the computerized check-in kiosk for driver’s license renewals to be performed in the credit union’s new Milford branch office, starting Thursday, under a contract with the state Department of Motor Vehicles.

Hear the screams as riders test Six Flags' new attraction, the Quinn Spinsanity, a pendulum gondola ride named after The Joker’s partner-in-crime that spins 40 riders at a time at speeds as high as 70 mph and 15 stories high. Story here.

Hear the screams as riders test Six Flags' new attraction, the Quinn Spinsanity, a pendulum gondola ride named after The Joker’s partner-in-crime that spins 40 riders at a time at speeds as high as 70 mph and 15 stories high. Story here.